EU big fund battle is finally over - but Irish fight for a share is just beginning

John Downing

New normal: European Commission President Ursula von der Leyen and European Council President Charles Michel do an elbow bump at the end of the summit. Photo: Stephanie Lecocq/Pool via REUTERS

July 22 2020 08:10 AM

After five days of bitter haggling EU leaders have all dubbed their €1.8tn funding deal "historic". But how relevant is it for ordinary people? And how much will Ireland get?

Let's answer a few basic questions.

Echoes from this marathon EU leaders' summit were often sour. Is the outcome really "historic"?

Yes. For once over-used talk of "history" is justified. Three big things are happening here as a first. The EU as an entity is going to the world money markets itself to borrow. This combined EU fire-power is being used to give non-repayable grants and low-interest loans to countries worst hit by Covid-19. It's big stuff: the EU Covid-19 fund totals €750bn. Grants amount to €390bn and loans €360bn.

What is the relevance to ordinary citizens?

It is hoped this will stave off mass long-term recession. In the wake of coronavirus the EU's 460 million citizens faced the biggest economic downturn in the bloc's 63-year existence with massive job losses.

EU leaders are determined this economic pump-priming using the EU's combined resources can head off a major economic crisis. Already, international money markets have responded positively, the euro values are up, and borrowing rates for Italy, which was among the worst hit, have dipped to a new low rate.

What is the story about the EU's seven-year €1.07tn budget?

To give continuity the EU leaders agree funding in blocks of seven years and the next one starts in January 2021 lasting until December 2027. This budget deal was very late for various reasons. Detailed rules for schemes like science research, farming and regional and social grants, take a long time to be written and approved. The devil will be in the details of many of these plans for member states, including Ireland. There are real fears that rural development and farm funds will be hit and it's the big challenge for Taoiseach Micheál Martin and his Government.

What were the summit rows about? Will they have long-term damaging fall-out?

North European states, led by the Netherlands, fought to impose tough fund rules and reduce grant amounts with more emphasis on repayable loans. Many states also wanted human rights clauses on funding for countries like Hungary and Poland.

Compromises saw the overall grants cut from €500bn to €390bn. Any member state can object if a funded country breaks economic rules - but an investigative process here is time-limited to three months. On the human rights issue, a number of countries constituting "a qualified majority" under EU rules can trigger investigations. These rows were to be expected. The issues are vital for all involved and compromises had to meet 27 countries' special demands. Normal business should and can resume.

Where was Ireland amid these summit rows?

Basically not with the frugal north Europeans. The Taoiseach said the EU coronavirus fund had to be big and more based on grants than loans.

He said large EU loans to member states would only add to the debt problem. On the seven-year budget plan he defended rural and farm funds especially.

So, how much can Ireland hope to get?

It's not decided yet - but some details are evident. When the draft plan was first announced by the EU Commission, Ireland's potential take was put at a disappointing €3bn and criticised by former public expenditure minister Brendan Howlin, who has long experience of EU negotiations. Irish ministers and diplomats have been fighting that ever since. A big problem was the allocations, which gave Italy and Spain the lion's share, were based on economic data done before coronavirus hit. Ireland's economy was doing well at that stage.

The Taoiseach will hope two new things should increase Ireland's share. First is a new €5bn Brexit emergency fund for countries and sectors worst hit by the UK's departure. Second is the holding back of 30pc of funds until 2021 and 2022 to see how badly national economies are hit.

What about traditional EU farm, regional and social funds which have benefited Ireland for decades?

The Taoiseach insisted farm funds will be safeguarded with €300m extra guaranteed for Ireland. But amid the haggling and moving funds about to meet various demands, there are fears about these "traditional" EU grant programmes. This is where the real fight will be for Ireland.

What reaction has the Taoiseach got at home?

All sectors are poring over the details and Mr Martin's summit report to the Dáil will be closely watched. Farm union leaders have warned of rural and farm fund cuts. IFA president Tim Cullinan said these 9pc fund cuts contradict Brussels' demands on climate change and the environment.

ICMSA president Pat McCormack said coronavirus supports cannot be funded by farm cuts. Farm union leaders have warned EU cuts must be paid up from national coffers.

EU big fund battle is finally over - but Irish fight for a share is just beginning

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